Sumsion v. Bay Harbor Farm, LC

• Decision Date: 14 June 2018
• Docket Number: No. 20170066-CA,20170066-CA
• Parties: Steven R. SUMSION, Appellant, v. BAY HARBOR FARM, LC, Appellee.
• Court: Utah Court of Appeals

427 P.3d 511

Steven R. SUMSION, Appellant,

v.BAY HARBOR FARM, LC, Appellee.

No. 20170066-CA

Court of Appeals of Utah.

Filed June 14, 2018

Steven R. Sumsion, Provo, Attorney for Appellant.

Stephen W. Geary, Attorney for Appellee.

Judge Ryan M. Harris authored this Opinion, in which Judges Gregory K. Orme and Diana Hagen concurred.

Opinion

HARRIS, Judge:

¶1 For more than a decade, attorney Steven R. Sumsion has tried to collect attorney fees he believes he is owed for representing Bay Harbor Farm, LC (Bay Harbor) in a workers' compensation case. Bay Harbor refuses to pay Sumsion's bill, because Bay Harbor maintains that it never hired Sumsion, and that Sumsion only represented Donald Proctor, one of Bay Harbor's members, in that litigation. The dispute between these parties has reached us once before, when we determined that an attorney's lien that Sumsion filed against Bay Harbor's property was not a "wrongful lien" under Utah's Wrongful Lien Act. See Bay Harbor Farm, LC v. Sumsion (Bay Harbor I ), 2014 UT App 133, 329 P.3d 46. In that case, we left open the question of "[w]hether ... Bay Harbor was actually Sumsion's client." Id. ¶ 14.

¶2 That question is now squarely presented to us, and we answer it in the negative, because we conclude that Proctor did not have authority to retain Sumsion on behalf of Bay Harbor, and that Bay Harbor did not otherwise retain Sumsion. This conclusion compels the dismissal of several of Sumsion's claims, and we conclude that Sumsion's remaining claim (for unjust enrichment) is untimely filed. Accordingly, we affirm the district court's entry of summary judgment in favor of Bay Harbor.

BACKGROUND

¶3 In 1994, Proctor, Stan Weed, and two other individuals formed Bay Harbor, a Utah limited liability company (LLC). According to its Articles of Organization, the company was formed "to engage in the business of the production and sale of agricultural products." Weed and Proctor each held a 45% interest in Bay Harbor, and the other two members collectively held a 10% interest. Substantially all of Bay Harbor's assets consist of real property located in Utah County. Bay Harbor began as a member-managed company, but in 1997, the company was changed to a manager-managed company. Bay Harbor's Amended Articles of Organization, filed in 1997, list both Weed and Proctor as managers. Bay Harbor does not have—and has never had—a written operating agreement.

¶4 Bay Harbor's founding members intended "to operate the real property as a farm while awaiting an opportunity to sell the property for development, with the hope that operating income would cover the operating and mortgage costs." However, the company never turned a profit, and the only time it distributed money to its members was when it sold various portions of real property it owned.

¶5 In 2001, Weed and Proctor had a falling-out, and Weed, acting alone, "concluded that it was counterproductive to continue to try to operate Bay Harbor as a farm," and he "informed [Proctor] that Bay Harbor would cease operation." Purporting to act on behalf of Bay Harbor, Weed filed Articles of Dissolution in an attempt to dissolve the company. That same year, Bay Harbor leased its property to Proctor "for the nominal cost of $1 per year, plus the obligation to pay for water shares, insurance, mortgage payments, and related expenses for operating the property as a farm." According to Weed, the company was dissolved "so that [Proctor] would be operating independently and not under the umbrella of the LLC." However, even assuming that the 2001 dissolution papers are valid, Bay Harbor has never completely wound

up its operations; indeed, to this day it continues to own real property in Utah County.¹

¶6 In 2002, a worker was injured while assisting with the farm operations on Bay Harbor's property. Eventually, that worker filed a workers' compensation claim against both Bay Harbor and Proctor (the Workers' Compensation Litigation). In 2005, the Utah Labor Commission notified Weed, as registered agent for Bay Harbor, about the Workers' Compensation Litigation. Weed responded by sending a letter to the Labor Commission asserting that Bay Harbor should not bear any liability because the company had been dissolved in 2001, prior to the worker's injury. Weed took no other action to defend Bay Harbor in the Workers' Compensation Litigation.

¶7 Around that same time, Proctor retained Sumsion to defend him personally in the Workers' Compensation Litigation. Sumsion believed that Proctor had authority to hire him to also represent Bay Harbor, and therefore Sumsion entered an appearance in the Workers' Compensation Litigation on behalf of both Proctor and Bay Harbor. According to his billing records, Sumsion began performing work purportedly on Bay Harbor's behalf in February 2005. Sumsion's billing entries regularly include time he spent with Proctor and Proctor's wife Anna (Anna² ); the entries do not reflect any meetings with Weed.

¶8 In December 2005, some ten months after his first billing entry, Sumsion sent an engagement letter to Proctor (the 2005 Engagement Letter). The letter was addressed to both Donald and Anna Proctor, and listed "Donald Proctor, Manager" of Bay Harbor, as an additional addressee. The letter referenced "Bay Harbor Farms, LLC related activities and other personal matters" as the subject of the retention. The letter also listed an outstanding balance of $73,119.36. The letter did not specifically mention the Workers' Compensation Litigation, nor did the letter contain any mention of Weed. Proctor counter-signed the letter twice, once on a line above his own name, and once on a line above the phrase "Bay Harbor Farms, LLC, Don Proctor, Manager." Anna also signed the letter on her own behalf.

¶9 The same day they signed the engagement letter, Proctor and Anna also signed a promissory note (the First Promissory Note) in favor of Sumsion. As with the 2005 Engagement Letter, Proctor signed the First Promissory Note twice, once on a line above his own name, and once on a line above words proclaiming him to be the "manager" of Bay Harbor. The First Promissory Note contained an acknowledgement that "the balance owing" to Sumsion's law firm was $73,119.36, and provided that "this Note or any payment hereunder may be extended from time to time by the Holder hereof without in any way affecting the liability of such parties."

¶10 Sumsion entered his final billing entry related to the Workers' Compensation Litigation on July 13, 2006. On September 13, 2006, Sumsion filed an attorney's lien against Bay Harbor's property, claiming that Bay Harbor owed him $119,168.48 for work he performed on its behalf.³

¶11 In response, Bay Harbor filed a lawsuit seeking a judicial declaration that Sumsion's attorney's lien was wrongful, and eventually the case found its way to this court in Bay Harbor I . There, we determined that Sumsion's lien was not wrongful. Bay Harbor I , 2014 UT App 133, ¶ 11, 329 P.3d 46. We stated that Sumsion filed an attorney's lien, which is "expressly authorized by statute, and it is therefore not wrongful," and that "[t]his is true even if it ultimately proves unenforceable, whether because Bay Harbor was not Sumsion's client, because the Bay Harbor property was unconnected to the workers' compensation claim, or on some other basis." Id. We specifically declined to address the question of whether Bay Harbor was actually Sumsion's client, preferring not to address that question in the context of that case. Id. ¶ 14 (stating that "[w]hether or not Bay Harbor was actually Sumsion's client should be evaluated in a proceeding other than an expedited wrongful lien hearing, upon consideration of any relevant evidence the parties may present").

¶12 In 2008, after Sumsion recorded his attorney's lien, Proctor passed away. Roughly a year later, in January 2009, Anna—purporting to act on behalf of Bay Harbor by virtue of her role as personal representative of Proctor's estate—signed a second promissory note in favor of Sumsion (the Second Promissory Note). The Second Promissory Note explained that the note would "become due and payable upon the sale of any of [Bay Harbor's] real property interests."

¶13 In July 2014, soon after this court issued its decision in Bay Harbor I , Sumsion initiated a separate lawsuit against Bay Harbor, attempting to foreclose upon Bay Harbor's property pursuant to his lien. Sumsion also sued Bay Harbor for breach of contract related to the 2005 Engagement Letter and the First Promissory Note. Sumsion also brought a claim for unjust enrichment.

¶14 Bay Harbor moved for summary judgment, asserting that Proctor did not have authority to retain Sumsion on its behalf, because two-thirds of the profit-sharing members of Bay Harbor did not authorize Sumsion's retention. Bay Harbor further argued that Sumsion's claims were time-barred because (1) Sumsion's claims accrued in August 2006; (2) he did not file this suit until July 2014; and (3) under either the four-year or six-year statutes of limitations, all of Sumsion's claims were untimely.

¶15 After full briefing and a hearing, the district court granted Bay Harbor's summary judgment motion, agreeing with both of Bay Harbor's arguments. The court explained that "[w]ithout the agreement of at least two-thirds of those holding a profits interest in a company, a company cannot be bound by the acts of a member on behalf of the company if those acts are outside the ordinary course of the company's business." The court then determined that "Proctor was not acting in the ordinary course of business" when he hired Sumsion. The court further concluded that Weed, Bay Harbor's other manager, did not assent to engaging Sumsion, and therefore less than two-thirds of Bay Harbor's profit-sharing members assented to hiring Sumsion. On the statute of limitations argument, the district court determined that Sumsion's claim accrued in August 2006, and that, under either the four-year or six-year statute of...